Shade versus intensification: Trade-off or synergy for profitability in coffee agroforestry systems?

Coffee agroforestry systems (shaded coffee) are considered less productive but more resilient than more intensive production systems. A persistent challenge for coffee farmers is the extreme fluctuations in coffee prices, leading to a loss of profitability and lower investment in production. There are contrasting conclusions regarding the profitability trade-off between increasing productivity through intensification and the sustainability benefits of shade tree coffee agroforestry systems. Using a typology of different intensification and sustainability coffee production strategies in Costa Rica and Guatemala, we assess the economic feasibility and sensitivity of those strategies under likely future scenarios of price and cost variability. Based on on-farm survey data from a large-scale survey of farmers with information on costs, prices and yields over ten years, a probabilistic cash flow analysis was used to create a stochastic model for net returns. Under future price scenarios, the Net Present Value (NPV) for coffee production was greatest for the high-productivity farms with high investment and moderate shade levels. The NPV of low-investment farms was greater (and positive) for highly shaded coffee production than for low shade coffee production (which, on average, had a negative NPV), despite the two having similar levels of investment. Diversification with bananas or avocados in association with coffee only improved NPV for high-value export avocado. Despite the substantially higher production costs for the high productivity systems, they generally maintained higher probabilities of achieving a positive net cash income or achieving a living income under most labour, fertilizer or coffee price scenarios, except a 50% fall in coffee prices. Diversification effects were as sensitive to changes in labour and input costs but in most cases reduced the probability of a more pronounced negative net cash income under low coffee price scenarios. We find an increase in coffee prices by 50% was needed to enable all farmers to achieve a positive net cash income; with an increased probability of achieving returns comparable with a living wage for higher productivity systems. We conclude that high-investment, high-productivity coffee production systems are compatible with shade-grown production; more likely to lead to economic success and achieve positive returns under most conditions, except large falls in coffee prices. For farmers with limited capacity to invest, high-shade production systems provide a positive cash return under a broader range of price conditions than low-shade systems.